Telefonica Sa · BME:TEF
Telefonica Sa — 2001 Global Communications Investor Conference (Merrill Lynch)
35 slides from Telefonica Sa's conference presentation, Mar 13, 2001
Slide 1: 2001 Global Communications Investor Conference
2001 Global Communications Investor Conference Merrill Lynch New York, March 13th 2001
Slide 2: A value growth company: Delivering results
A value growth company: Delivering results Investor Conference A value growth company: March 2001, New York. Delivering results
Slide 3: A Value Growth Company
A VALUE GROWTH COMPANY Solid value based on fundamentals: large client base, strong operational skills, unmatched intangibles, balanced and flexible business structure Superior EBITDA and strong financial position Addressing major open issues: UMTS, Regulation, Acquisitions Management priorities tha
Slide 4: A market with more than 500 million potential customers
A MARKET WITH MORE THAN 500 MILLION POTENTIAL CUSTOMERS... SPAIN MEXICO z Wireline: TdE: z Wireless: VENEZUELA 100% z Wireless: TME – Bajacel: 100% z Wireline: z More than – Movitel: 90% z Internet CANTV 6.4% – Norcel: 100% – Access nº 1 65 million – Cedetel: 100% – Portal: nº1 z Internet: customers
Slide 5: …With growth potential
…WITH GROWTH POTENTIAL GDP Growth (%) Average 2000 2001 2002-2004 USA 4.9 2.0 3.0 EURO 3.4 2.9 3.2 Spain 4.1 3.2 3.4 Brazil 4.2 4.2 4.4 Argentina -0.2 2.9 4.5 Mexico 6.9 4.5 5.2 Chile 5.4 5.2 6.2 Peru 4.0 2.5 4.7 Source: Telefónica estimates; OVUM; Pyramid; Forrester; IDC; US Census Bureau Investor
Slide 6: Latin America remains a large growth opportunity
LATIN AMERICA REMAINS A LARGE GROWTH OPPORTUNITY USD billion 24 19 Telecoms market growth Telecoms market current opportunity 2001-2005 size 2000 Spain Latin America* * Current GDP Latam aprox. 1,790 USD billion x 34% GDP growth in 5 years x 4% of GDP in telecoms Source: IDC; Dataquest; WEFA-WMM Inv
Slide 7: Every growth project must be based on clients
EVERY GROWTH PROJECT MUST BE BASED ON CLIENTS... Growth in customer base Growth in Dimensions of usage of current growth services Growth in new services Investor Conference A value growth company: March 2001, New York Delivering results
Slide 8: Strong growth in our customer base and excellent prospects
…AND TELEFONICA IS UNIQUELY POSITIONED: STRONG GROWTH IN OUR CUSTOMER BASE AND EXCELLENT PROSPECTS 10.8% 39.7 Managed 2000 penetration fixed clients 35.8 (millions) LatAm USA Europe 1999 2000 Wireline 13% 68% 61% Managed penetration 48.8% cellular 23.0 clients 15.5 Wireless 13% 41% 63% (millions) pe
Slide 9: We have achieved strong operational skills
WE HAVE ACHIEVED STRONG OPERATIONAL SKILLS... Productivity Europe Latam Lines/employee Lines/employee (year 2000) 500 493 TdE 790 420 582 573 516 469 362 TI 416 385 340 289 DT 262 BT 248 238 260 250 FT 180 ge m na * a r* 1996 1997 1998 1999 2000 Ar leco om V * Te asil nti ex NT p SA lem leS lec lm T
Slide 10: …And a strong competitive position
…AND A STRONG COMPETITIVE POSITION 93.7% combined market share in wireline operations 50.4% combined market share in wireless operations 90% total market share of corporate customers where we operate as incumbents Investor Conference A value growth company: March 2001, New York Delivering results
Slide 11: A successful track record of turn arounds
A SUCCESSFUL TRACK RECORD OF “TURN AROUNDS” From date of acquisition To date z LIS (‘000) 6,407 10,596 TELESP z Number of lines/employee 338 790 (acquired Aug. 98) z EBITDA/revenues 58% 66% z LIS (‘000) 1,696 4,327 TASA (acquired z Number of lines/employee 78 408 Nov. 90) z EBITDA/revenues 38% 60% I
Slide 12: Unmatched intangibles
UNMATCHED INTANGIBLES z Market knowledge Knowledge z Operational knowledge z Successfully applied in different geographies z Strongimage, high awareness everywhere Brand z One umbrella brand in natural markets z Credibility Reputation z Recognized execution capabilities z Government, regulatory bodi
Slide 13: Telefónica has a balanced business structure
TELEFONICA HAS A BALANCED BUSINESS STRUCTURE... BUSINESS TELEFÓNICA’S POSITION Basic service Wireline in Wireline in z Large, Spain Latam addressable client base: Mobility >500 M in our core markets + 300M elsewhere Broadband Wireline in Wireline in Latam z Broad offering Spain provides Internet fle
Slide 14: …And a flexible organization
… AND A FLEXIBLE ORGANIZATION Wireline in Others Wireline in Spain Latam z Natural owner of the businesses z Operating flexibility to better serve customer demands z Increased management accountability z High potential for capturing synergies z Not considering pure spin-offs z Further IPO’s based on
Slide 15: A Value Growth Company
A VALUE GROWTH COMPANY Solid value based on fundamentals: large client base, strong operational skills, unmatched intangibles, balanced and flexible business structure Superior EBITDA and strong financial position Addressing major open issues: UMTS, Regulation, Acquisitions Management priorities tha
Slide 16: Telefónica achieved strong performance in year 2000
TELEFONICA ACHIEVED STRONG PERFORMANCE IN YEAR 2000... 2000 Financial Highlights Million 2000 % Change Revenues (Euro) 28,485.5 24.1 EBITDA (Euro) 11,918.8 9.5 Net income (Euro) 2,504.8 38.8 EPS (Euro) 0.67 18.5 Wireline customers 42.3 10.1 Wireless customers 24.9 48.9 Internet access customers 6.1
Slide 17: Along with well balanced financials
ALONG WITH WELL BALANCED FINANCIALS Euro 12 Bn. EBITDA Euro 26.9 Bn. Net debt Euro 87 Bn. Market Cap. 2000 12/2000 5/03/2001 … with full control and access to the highest diversified cash flow in the industry 1 1999 1999 EBITDA EBITDA 10.9 47 12 40 breakdown breakdown 1 2000 2000 EBITDA EBITDA 36 19
Slide 18: A milestone year: asset growth
A MILESTONE YEAR: ASSET GROWTH…. 65,043 47,744 1999 2000 Consolidated Net Assets (Euro Mill.) YoY growth: + 36.2% Investor Conference A value growth company: March 2001, New York Delivering results
Slide 19: …While preserving a strong balance sheet
… WHILE PRESERVING A STRONG BALANCE SHEET 1999 2000 Net Debt 20,472 26,951 Minority Interest 10,614 9,330 Shareholders’ Equity 16,658 28,762 Total Capital Employed 47,744 65,043 Net Debt / Total Capital Employed 42.9% 41.4% Net Debt / EBITDA (x) 1.9 2.3 EBITDA / Net financial expenses (x) 6.1 6.4 In
Slide 20: With a clear financial strategy and timely execution
WITH A CLEAR FINANCIAL STRATEGY & TIMELY EXECUTION z Equity funding z Full access to LATAM’s cash flows z Optimising WACC and credit rating z Financial flexibility z Enhancing stability of a growing cash flow z Efficiency and transparency in capital allocation Investor Conference A value growth comp
Slide 21: …Which has positioned Telefónica ahead of its peers
…WHICH HAS POSITIONED TELEFONICA AHEAD OF ITS PEERS z Equity-funded acquisitions (Euro 30.4 bn in 2000) z New organization optimizes cost of capital Net debt/ Net debt EBITDA EBITDA (Euro Bn) (Euro Bn) Telefónica Telefónica 2.4 26.9 12.0 Deutsche Telekom 4.5 65.3 14.5 France Telecom 5.2 56.5 10.9 Br
Slide 22: Rating stability
RATING STABILITY Evolution of ratings (S&P) 09/99 12/99 03/00 06/00 09/00 12/00 03/01 FT AA+ BT BT BT FT AA KPN KPN KPN KPN FT FT AA- DT DT DT A+ Telefónica Telefónica Telefónica Telefónica Telefónica Telefónica Telefónica FT FT A Vodafone Vodafone Vodafone BT BT BT BT Vodafone Vodafone Vodafone KPN
Slide 23: A Value Growth Company
A VALUE GROWTH COMPANY Solid value based on fundamentals: large client base, strong operational skills, unmatched intangibles, balanced and flexible business structure Superior EBITDA and strong financial position Addressing major open issues: UMTS, Regulation, Acquisitions Management priorities tha
Slide 24: UMTS in Germany
UMTS IN GERMANY We We are are working working hard hard to to deliver deliver 1. Customers z We are emphasizing the commercial front: negotiating To date, we from day 1 with potential partners, exploring options have not earned 2. An efficient z Negotiating shared infrastructure arrangements and inv
Slide 25: Our regulatory approach
OUR REGULATORY APPROACH z First objective: maintain open communication and active dialog with regulators in every country where we operate z Spain: — Wireline: last building blocks of regulatory model settled (unbundling of local loop and price cap) and tariff rebalancing will follow — Wireless: lik
Slide 26: Acquisitions and ventures
ACQUISITIONS AND VENTURES JV with Portugal Selective Complementing our competitive Telecom in Brazilian position mobile market Acquisition of Accretive Increasing EBITDA Motorola’s wireless assets in Mexico Consolidation at No to “merger of equals” parent level Will not turn our backs to opportuniti
Slide 27: A Value Growth Company
A VALUE GROWTH COMPANY Solid value based on fundamentals: large client base, strong operational skills, unmatched intangibles, balanced and flexible business structure Superior EBITDA and strong financial position Addressing major open issues: UMTS, Regulation, Acquisitions Management priorities tha
Slide 28: Management priorities
MANAGEMENT PRIORITIES 1 Continue improving results in consolidated businesses 2 Continue expansion in Latin “Achieve America sustained superior earnings Drive developing businesses growth” 3 towards profitability leveraging the Group 4 Continue business building Capture inter-business and Group syne
Slide 29: Management priorities
MANAGEMENT PRIORITIES 1 Leverage existing client bases and Continue improving results in consolidated businesses maximize cash generation short and long term: we cannot fail 2 Continue the expansion in Latin America Profit from a natural extension of our leadership “Achieve sustained superior earnin
Slide 30: A value growth company: Delivering results
Investor Conference A value growth company: March 2001, New York Delivering results
Slide 31: A value growth company: Delivering results
Investor Conference A value growth company: March 2001, New York Delivering results
Slide 32: Managing key performance metrics
MANAGING KEY PERFORMANCE METRICS CAGR Euro billion, in constant exchange rates. Current business perimeter Focus on key aspects 24% 13-15% z Manage customer profitability 28 and market share 22 Leverage TOP z Marketing effectiveness to enhance usage client base LINE z Cross-selling 99 00 04 10% 9-12
Slide 33: Our strong fundamentals and solid strategic position
OUR STRONG FUNDAMENTALS AND SOLID STRATEGIC POSITION PUT US IN A SUPERIOR SITUATION TO CAPTURE PROFITABILITY AND GROWTH Strong fundamentals Strong strategic Telefónica is in a position along good position to y Large client base growth engines simultaneously y Strong operational skills capture y Inte
Slide 34: A value growth company: Delivering results
Investor Conference A value growth company: March 2001, New York Delivering results
Slide 35: Slide 35
Telefónica — 2001 Global Communications Investor Conference (Merrill Lynch) on 6ix